Central government “two-tier code” removed

The Cabinet Office announced on 13 December 2010 the abolition of the Code of practice on workforce matters in public sector service contracts (the two-tier code) with immediate effect. The code applied where public services were outsourced to private sector providers. One of the key functions of the code was to ensure that companies taking over public sector contracts would provide pay and conditions for new staff on terms broadly comparable to those of the ex-public sector staff they work alongside. Scrapping the code will open the door for private sector companies to compete for public sector contracts by offering the lowest wage levels.

The code has been replaced by a set of six “principles of good employment practice”, available to download from the Cabinet Office website. The third principle states: “Where a supplier employs new entrants that sit alongside former public sector workers, new entrants should have fair and reasonable pay, terms and conditions. Suppliers should consult with their recognised trade unions on the terms and conditions to be offered to new entrants.”

The local government equivalent of the two-tier code (the Code of practice on workforce matters in local authority service contracts) remains in force at the time of writing, but is under review and indications are that a similar approach is likely to be adopted.